Tech Partnership Strategies

In high tech, you partner. Someday, somehow, with someone. Partnerships are inevitable in tech.

The reason is very simple: tech is complex. Nobody, not even Google, can own all aspects of a tech product; because the complexity for anything, from your wrist watch to your on-site cloud infrastructure, is more complex than any single company can deliver on its own.

The question then for any tech company, and especially for startups, is who to partner with, when and why?

Cohabitation and Marriage

A stark reality that many ignore is that choosing a tech partner is like choosing a mate. You are creating a mutually dependent relationship. If one or the other partner can walk away with no repercussions, then you have merely cohabitated. It was fun while it lasted, but you are now alone, with single income, maybe broke, and without good prospects.

Yet this is the typical necessity of tech partnerships. Technology moves so quickly that a viable partnership today is inviable tomorrow. Tech companies must play the field, or at best be serial monogamists when it comes to partnerships.

Yet they still must treat each partnership like a marriage. This is because the ultimate goal is to create a whole product, a sum of contributed technologies that provide the end customer (be it an integrator in B2B or a single mom in B2C) with a product that fulfills all their needs. Akin to creating a home – albeit a temporary one – tech partnerships seek to create whole products to markets with demand for them.

The best partners have necessary resources. I’m not talking about money – never consider a partner just for financial issues. A partner needs to have valuable non-financial resources that you badly need; established brand, market access, tools, patents, mentorship. Gold diggers might need a sugar daddy, but what you need is someone who completes you.

Motivation for Marriage

Despite the temporal nature of partnerships, they still should not be entered into without need. Partnerships are usually created because:

You have something of interest to the partner: This is often the realm of startups, but it happens between mature companies as well.

You lack some resources and need a partner: Keep an open mind about what can constitute “resources.” Many partnerships develop because one partner has access to markets. Look at any of the SaaS vendors with “app shops.” They grow by making plugin solutions available, and the plugin vendors grow because they get access to the primary partner’s customers.

You need to move quickly to establish the market: One painful type of partnership is where you could, given time, develop the whole product in-house, but market forces drive you to act more quickly.

Ways to Tie the Knot

Simple bilateral agreements are well understood. But there are other forms of partnering that are taking on more importance as major tech companies become first movers and fast followers in markets.

Spin-in: This is where the partner agrees to take you into the company and lets you use its facilities for the opportunity to acquire you at some future date. The downside to this approach is that if you are really successful, your partner can acquire you on the cheap. Additionally, you are somewhat locked up. The upsides, though, are pretty obvious – access to skills, mentors, markets, tech, money and more.

Spin-out: This is where a group of employees are threatening to leave to start their own company. The company agrees to partner with them and help them for an ownership in the spin-out. This may be the best win-win situation when the confines of a big company frustrate obstreperous employees with a vision (much like my story of how I conceived of and sold wafer steppers to Texas Instruments without the benefit of mentioning this to my boss. You can read the whole story in Tough Things First).

Straight partnership: This is where you find a company that is willing to invest and possibly give some non-financial assistance. Though not universal, these companies likely have designs on you, your team or your intellectual property, so keep those safe, secure and happy.

Enter with Care

You will partner. In tech, it is one of the few things you can count upon. But approach partners with the same diligence you would a VC, a mate, or a ticking time bomb. Have an inarguable need to partner, chose partners wisely, and know that as soon as markets and technology change, so too will your partners. This partnering-as-cohabitation is not a true marriage. There are significant risks that need to be carefully comprehended. Remember, when starting off, your partner is the big fish and you are the small guy. Don’t get swallowed up in the process.